Categorized | Domaining Tips

Is There Room for Institutional Investors in the Domaining Industry?

Posted on 24 January 2014 by Andrei

In my opinion, there will be but we’re not there yet.

What’s an institutional investor?

Let’s start with the Wikipedia definition:

Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets. They can also include operating companies which decide to invest their profits to some degree in these types of assets.

In other words, institutional investors are big players who are able to put a lot of money on the table. In fact, therein lies the challenge, they’re *only* willing/able to put lots of money on the table.

In other words, if there’s not enough liquidity, they won’t be interested.

The domaining industry is, for that reason, not mature enough yet.

Let’s assume an institutional investor would want to invest 8 figures in the LLL dot com market. To you and me, that’s a very high amount but to an institutional investor, it’s anything but high.

The problem is that there just isn’t enough volume to invest such an amount smoothly in a short time frame, at least not yet.

In other words, the market would be distorted if someone were to invest this much money quickly and prices would go up dramatically. The same way, if the institutional investor would end up wanting to liquidate that position (so if everything would need to be sold), there’s just no way this would be possible in a short time frame without lowering prices dramatically.

This is what the reseller market still lacks, volume.

We’ve come a long way but there just isn’t enough volume to make the reseller market attractive in the eyes of institutional investors yet. There’s no doubt in my mind that institutional investors will end up being involved in the future but the reseller market is just not mature enough yet.

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1 Comments For This Post

  1. Tony Says:

    Institutional investors wouldn’t go after domain by domain, they would go after domain portfolios. If they ever come into existence, I can see them approaching medium to large portfolio holders and making offers that way.

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